TOPICS > Economy

Food Prices Will Likely Remain High, Report Warns

BY Admin  May 29, 2008 at 10:45 AM EDT

Pakistani workers protest food prices; AP photo

The world’s poorest nations, particularly those largely dependent on food imports, are most vulnerable to soaring food costs and will require increased humanitarian aid to stave off hunger and illness, according to a joint agricultural report by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization said.

“Rising prices now translate, unfortunately, as an increase in hunger and civil strife. Uncertainty rules and our people are worried,” FAO chief Jacques Diouf told a Paris news conference, according to the Associated Press.

OECD head Angel Gurria added: “The end of cheap food in a world where half the population lives with less than $2 a day is a source of grave concern.”

Beef and pork prices would probably stay around 20 percent higher than in the last 10 years, while wheat, corn and skimmed milk powder would likely command 40-60 percent more in the 10 years ahead, in nominal terms, the FAO/OECD report found.

“We do not expect the current price levels to last. But the average of most agricultural commodity prices over the next 10 years will still exceed the average of the previous decade by 10 to 50 percent, depending on the commodity,” Gurria said.

Reasons for the rising in food prices include high oil prices, expanding populations, trade policy trends, extreme weather, growth in biofuel production and market speculation. Food prices have spiked in recent months, trigging street protests from Africa to Asia.

In April, the global food shortage and soaring cost of staple foods led the U.N. Wood Food Program to dub the crisis a “silent tsunami” as the prices of basic crops like rice, maize and wheat hit record highs.

In many low-income countries, food expenditures average over 50 percent of income and the higher prices contained in this outlook will push more people into undernourishment,” the report said.

Rapidly developing countries such as India and China will dominate production and consumption of most commodities by 2017, the report said.

“There is strong reason to believe that there are now also permanent factors underpinning prices that will work to keep them both at higher average levels than in the past and reduce the long-term decline in real terms,” said the report, issued ahead of a world food summit in Rome next week. “For the Least Developed Countries . . . the projections thus show greatly increased vulnerability and uncertain food supplies during an era of high commodity prices and high price volatility.”

The use of agricultural land to produce biofuels and overall competition from the energy industry also remains a source of concern among some officials.

Analysis “suggests that the energy, security, environmental and economic benefits of biofuels production … are at best modest, and sometimes even negative,” the report said, urging “alternative approaches.”

Under U.S. plans, about a quarter of the nation’s corn crop will be channeled into ethanol production by 2022 while the European Union is also aiming for as much as 10 percent of road transport fuel to be produced using crops by 2020, Reuters reported.

The report also advised examining the link between climate change and water availability and the impact on production and yield shortfalls, among other measures.